1. Market Structures Test Review: See what you know!

2. Perfect Competition Monopolistic Competition Oligopoly Monopoly “I hate Monopolies” Perfect Competition is Adam Smith’s dream! Most competitive Least competitive 4 Market Structures

3. Adam Smith believed A.Markets are self regulating B.Competition produces efficiency C.There is a role for Government Investment in public projects D.All listed are true E.Only B & C are true

4. Which statement is TRUE: A.Perfectly Competitive firms are price setters B.Oligopolies have some price control C.Monopolies are price takers D.All listed are true E.None listed are true

5. In Perfect Competition A.Firms can earn economic profit in the short run B.Firms can earn economic profit in the long run C.Firms have easy & free entry into the market D.All listed are true E.Only A & C are true

6. The perfectly competitive market for T- shirts is in long run equilibrium. If demand for T-shirts falls, then: A.Equilibrium price will stay the same B.A single firm becomes a price taker at a higher price C.Quantity produced in the T-shirt market will rise D.Some individual firms will exit the market E.All listed are true

7. Which is not an example of free market failures: A.Price Discrimination B.Pricing Fixing C.Predatory Pricing D.Negative Externalities E.All listed are examples of market failures

8. Which statement is TRUE regarding a Negative Externality A.They occur when some costs of production fall on society (spillover costs) B.Government can correct a negative externality by taxing production of good C.They result in “too much” production D.All listed are true E.Only A & C are true

9. Monopolies: A.Produce a higher quantity than perfect competition B.Produce a lower price than perfect competition C.Often develop when there are barriers to entry or large economies of scale D.All listed are true

10. Oligopolies tend to rise when A.Governments enforce anti-trust laws B.Fixed costs are high C.Economies of scale are large in an industry D.All listed are true E.Only B & C are true

11. In Monopolistic Competition A.Firms can earn profit in the short run B.Firms earn zero economic profit in the long run C.Firms have easy entry into the market D.All listed are true E.Only A & C are true

12. Which is not true about Cartels A.OPEC is an oil cartel B.Cartels can directly set the price of a good C.DeBeers is a diamond cartel D.Cartels are illegal in the USA E.All listed are true

13. Why is Monopolistic Competition preferred over an Oligopoly A.They produce a higher quantity at a lower price B.They produce more choice among consumers C.The promote more competition D.All listed are good reasons E.Only B & C are good reasons

14. Pollution Credits are a way to correct the negative externality of pollution by A.Putting a price on pollution B.Allowing firms to profit from investments in “green technology” C.Allowing firms individual decision making D.All listed are true E.Only B & C are true